How a Solend Whale With a $108M Loan Nearly Crashed the Solana Network
A Solana whale nearly drained a liquidity pool, and it would have caused some major ripples—let’s dive in.
Solend, a decentralized lending protocol at the Solana community, has narrowly prevented having 95% of the SOL deposits in its lending pool liquidated.
At the middle of the talk is a massive account holder, known as a whale, with an outsized presence on the lending protocol and chargeable for the sizable majority of the SOL coins within it. The account had an first rate mortgage of $108 million really worth of US Dollar Coin (USDC) and Tether (USDT), collateralized in SOL, the local cryptocurrency of the Solana community. The loan risked being liquidated because the price of SOL tanked to as low as $27 on Wednesday and Saturday remaining week.
Had the price of SOL persevered to drop, and the $21 million in SOL collateralizing the mortgage gone into liquidation, Solend might have been left with almost no SOL. The project’s co-founder counseled that the rush to shop for up that much SOL for reasonably-priced ought to have crashed the $2.6 billion Solana network.
Early on Tuesday, the protocol announced that the whale borrower had moved $25 million worth of USDC debt to Mango Markets, another Solana-primarily based lending protocol, thereby assuaging Solend of some of the load and decreasing the protocol’s danger.
The general price locked in the Solend protocol topped out at $1.Four billion at the begin of April, became cut in half of, to $725 million, for the duration of the disintegrate of Terra in May and has been on a fast decline over the last week.
As of Tuesday afternoon, there has been $247 million really worth of belongings locked inside the protocol and any other $171 million in incredible loans.
That liquidation could were disastrous for Solend due to the fact, with prices lagging, the market would have struggled to take in the $21 million really worth of SOL (or 20% of the collateral) that would were routinely liquidated. The lending protocol might were vulnerable to dropping almost its whole SOL lending pool at significantly low charges.
And the scramble by means of liquidators to buy up the $21 million well worth of SOL for fireplace sale expenses might have placed the Solana community thru its paces, wrote Solend’s pseudonymous co-founder Rooter.
“This ought to reason chaos, putting strain on the Solana community,” they wrote inside the weblog post. “Liquidators could be specially lively and spamming the liquidate characteristic, which has been recognised to be a component causing Solana to head down inside the past.”
Having convinced the borrower to transport a number of their debt to every other protocol, Solend managed to lessen a number of its publicity, however didn’t put off it entirely. The borrower still owes $84 million to the protocol.
The network has taken action to mitigate that risk, or as a minimum save you it from happening again.
Earlier today, the Solend network voted to overwhelmingly approve a suggestion that would impose a $50 million borrowing restriction in line with account and alter the smart agreement (the computer code that governs the lending protocol) that allows you to temporarily liquidate 1%, now not 20%, of deposits on undercollateralized loans.
The DeFi lending protocol, its call a portmanteau of the phrases “Solana” and “lend,” began seeking to contact the borrower closing week while it looked just like the 5.7 million SOL deposit collateralizing a $108 million stablecoin loan (US Dollar Coin and Tether), can be liquidated if the price of SOL dropped to $22.30.
Rooter, the co-founder, even brought an offer, categorised “SLND1,” to take control of the account in order that the collateral may be liquidated in an prepared way that wouldn’t clog (and potentially crash) the Solana community. But after vote casting in support of that plan, the network overturned it.
“We’ve been listening to your criticisms about SLND1 and the way wherein it become performed,” the Solend team wrote at the inspiration to invalidate the vote after receiving comments that 24 hours had not been enough time for contributors to forged their votes.
At the time, markets have been reeling from news that crypto lender Celsius had frozen withdrawals to prevent a bank run and $3 billion hedge fund Three Arrows Capital was negotiating with lenders to hold itself solvent.